May 31, 2016

Homework Help: Finance

Posted by Anonymous on Saturday, August 10, 2013 at 2:47pm.

Problem 12.24

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Chipís Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 94 percent as high if the price is raised 8 percent. Chipís variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firmís FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)

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